Predicting the Impact of Democracy Vouchers:

Analysis and Questions in Light of South Dakota’s Successful Initiative

The Campaign Finance Institute (CFI) today has released a new study entitled “Predicting the Impact of Democracy Vouchers: Analysis and Questions in Light of South Dakota’s Successful Initiative”. The author is Michael J. Malbin, CFI’s Executive Director and Professor of Political Science at the University at Albany, SUNY.

South Dakota’s initiative, enacted by the voters on November 8, is likely to be challenged in the courts. Whatever the outcome, the initiative will be used as a model for future deliberations in other states and localities. The purpose of this study, therefore, was to use the initiative as a basis for thinking more deeply about vouchers. The report’s major conclusions appear in its Executive Summary, reproduced below. Related CFI studies may be found here.

EXECUTIVE SUMMARY

The voters of South Dakota in November 2016 decided, by initiative, to enact the nation’s first statewide voucher-based system of public campaign financing. Vouchers represent a new approach in campaign finance law. Reformers are encouraged by this state-level victory, while the skeptics remain skeptical. Because of the ballot box success, we would not be surprised to see imitation in future years…. This report is aimed at those future efforts. We believe this initiative is important enough to warrant detailed analysis before new proposals reach the design stage. Specifically, the report makes predictions and raises questions about how the new law is likely to work out in practice. In addition to serving as a first review of one state’s innovation, the exercise is meant to serve as a basis for thinking about vouchers, small donor matching funds, and similar initiatives elsewhere.

The bulk of the report contains two sections that focus on South Dakota. The first considers the status quo of campaign financing in South Dakota before the initiative, based on the Campaign Finance Institute’s analysis of data supplied by the National Institute on Money in State Politics. In the second, we project how the new program might work out in practice, using methodologies CFI has developed in seventeen years of nonpartisan, peer-reviewed research on money in politics. This analysis will show that the new vouchers and contribution limits are likely to have major effects. Some are likely to serve the supporters’ goals. Others raise questions. To summarize the most important expectations and questions:

Current donors: At a minimum, we expect the voucher system to reduce the importance of direct contributions from political action committees (PACs), most of which have been business-oriented. These organizations supplied an extraordinarily high 73% of the money raised by South Dakota’s incumbent state legislators in 2012 and 2014.

New donors: Vouchers should successfully accomplish some of their main goals by increasing the importance of small donors and putting financial power in the hands of many who currently give nothing. We have reason to expect that the new donors will be more demographically representative than current donors. We do not yet know whether they will be more politically representative or polarized than current donors, or more inclined toward issues promoted by organizations that fare well in the new environment.

Candidate participation: In any public financing system, the willingness of candidates to participate will depend upon how they weigh the value of the public funds against what they have to give up by participating. In South Dakota, accepting the vouchers means accepting lower contribution limits, including a zero limit for political parties and PACs. For reasons explained at greater length in the report, we expect the combination of rules such as these that are specific to South Dakota will affect participation in this state by incumbents and others who can raise more money under the existing rules.

Political parties and interest groups: Any voucher or public financing system will reshape the role of political parties and interest groups, but the precise effects will depend upon the mix of incentives in any given law. South Dakota’s initiative prohibits participating candidates from accepting contributions from parties or PACs. This is different from other voucher proposals and it effectively invites parties and interest groups to find alternative ways to participate. Increased independent spending is one likely development. But we would also not be surprised to see membership-based interest groups and organizations, as well as political parties, working hard to induce their members to donate their vouchers to the organizations’ preferred candidates. Those most likely will be large membership groups, such as labor unions, and issue advocacy groups on the left and right. Corporations would also be likely to urge their employees to contribute as most of them do now to increase participation by employees in their PACs. Whether the effects of any of these developments would be desirable remains an open question. The full report briefly summarizes the advantages and disadvantages of such developments.

New candidates: Finally, the new sources of campaign funding should make running for election financially more feasible for new candidates. However, it remains unclear exactly how the new candidates will differ from current candidates. The answer is likely to depend in part on whether interest groups recruit candidates to run, and then help their campaigns by steering contributions in their direction.

After articulating and analyzing these questions, the report concludes by emphasizing the importance of future research. Analysts should consider all of these questions as South Dakota’s new voucher system becomes operational. If unintended consequences do occur, researchers should ask whether they occurred in response to the basic concept of vouchers, or to South Dakota’s specific design features. To parse out this issue, we will need comparative analyses of other new program models as they are being implemented (in South Dakota, Seattle [WA], and Montgomery County [MD]), alongside the full variety of matching grant, flat grant and tax credit programs already in place in states and cities across the United States.

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PRACTICAL AND OBJECTIVE RESEARCH FOR DEMOCRACY

The Campaign Finance Institute is the nation's pre-eminent think tank for objective, non-partisan research on money in politics in U.S. federal and state elections. CFI's original work is published in scholarly journals as well as in forms regularly used by the media and policy making community. Statements made in its reports do not necessarily reflect the views of CFI's Trustees or financial supporters.